Question 1

Changes in equity in the previous periods up to the beginning of the current period that must be identified for the step 2 NCI entry do not include:

Accepted Answer

A)  changes in retained earnings, adjusted for the impact of BCVR entries on the opening balance of retained earnings. 
B)  transfers to/from reserves. 
C)  changes in share capital. 
D)  dividends paid/declared. 
A)  changes in retained earnings, adjusted for the impact of BCVR entries on the opening balance of retained earnings. 
B)  transfers to/from reserves. 
C)  changes in share capital. 
D)  dividends paid/declared.

Question 2

A Ltd holds a 60% interest in B Ltd. B Ltd sells inventories to A Ltd during the year for $10 000. The inventories originally cost $7 000. At the end of the year 50% of the inventories are still on hand. The tax rate is 30%. The NCI adjustment required in relation to this transaction is a debit to NCI of:

Accepted Answer

A)  Nil. 
B)  $420. 
C)  $630. 
D)  $1 050. 
A)  Nil. 
B)  $420. 
C)  $630. 
D)  $1 050.

Question 3

What is not an effect of choosing the partial goodwill method over the full goodwill method:

Accepted Answer

A)  there will be differences in the reported amounts at acquisition date in the consolidated statements. 
B)  the impairment test on goodwill after acquisition will be more complex under the partial goodwill method. 
C)  where the parent acquires some or all of NCI after obtaining control, there will be a higher impact on equity attributable to the parent shareholders. 
D)  many users or financial statements will so no value in the reported NCI. 
A)  there will be differences in the reported amounts at acquisition date in the consolidated statements. 
B)  the impairment test on goodwill after acquisition will be more complex under the partial goodwill method. 
C)  where the parent acquires some or all of NCI after obtaining control, there will be a higher impact on equity attributable to the parent shareholders. 
D)  many users or financial statements will so no value in the reported NCI.

Question 4

The step 1 NCI entry to reflect the NCI share of equity at acquisition date:

Accepted Answer

A)  never changes, so it does not need to be repeated every period. 
B)  changes every period as a result of changes in the subsidiary's pre-acquisition equity. 
C)  changes every period as a result of changes in the subsidiary's post-acquisition equity. 
D)  changes every period as a result of changes in NCI. 
A)  never changes, so it does not need to be repeated every period. 
B)  changes every period as a result of changes in the subsidiary's pre-acquisition equity. 
C)  changes every period as a result of changes in the subsidiary's post-acquisition equity. 
D)  changes every period as a result of changes in NCI.

Question 5

Jiminez Limited acquired 80% of the shares in Mustang Limited for $180 000. At acquisition date, share capital in Mustang was $100 000 and reserves amounted to $50 000. All assets and liabilities of Mustang were recorded at fair value at acquisition date except buildings which was recorded at $10 000 below fair value. The fair value of the NCI at the date of Jiminez's acquisition was $35 000 and the full goodwill method is adopted by the group. If the company tax rate was 30%, the goodwill recorded in relation to this business combination amounts to:

Accepted Answer

A)  $3 600. 
B)  $23 000. 
C)  $54 400. 
D)  $58 000. 
A)  $3 600. 
B)  $23 000. 
C)  $54 400. 
D)  $58 000.

Question 6

A Ltd holds a 60% interest in B Ltd. On 1 July 2017 B Ltd transferred a depreciable non-current asset to A Ltd at a profit of $5 000. The remaining useful life of the asset at the date of transfer was 4 years and the tax rate is 30%. The impact of the above transaction on the NCI for the year ended 30 June 2019 is:

Accepted Answer

A)  an increase of $700. 
B)  a decrease of $700. 
C)  an increase of $1 750. 
D)  a decrease of $1 750. 
A)  an increase of $700. 
B)  a decrease of $700. 
C)  an increase of $1 750. 
D)  a decrease of $1 750.

Question 7

The following information does not need to be disclosed for NCI:

Accepted Answer

A)  the NCI share of consolidated profit before tax. 
B)  the NCI share of consolidated profit after tax. 
C)  the NCI share of consolidated comprehensive income. 
D)  the NCI share of consolidated equity. 
A)  the NCI share of consolidated profit before tax. 
B)  the NCI share of consolidated profit after tax. 
C)  the NCI share of consolidated comprehensive income. 
D)  the NCI share of consolidated equity.

Question 8

Lu Nan Limited acquired 70% of the share capital and reserves of Hui Limited for $36 000. Share capital was $18 000 and reserves amounted to $10 800. All assets and liabilities were recorded at fair value except plant which was recorded at $2 500 below fair value. The company tax rate was 30%. The partial goodwill method is adopted by the group. The amount of goodwill acquired by Lu Nan Limited in this business combination was:

Accepted Answer

A)  $8 640. 
B)  $9 165. 
C)  $10 800. 
D)  $14 615. 
A)  $8 640. 
B)  $9 165. 
C)  $10 800. 
D)  $14 615.

Question 9

The intragroup transactions considered for NCI are normally those involving:

Accepted Answer

A)  the subsidiary selling inventories items or non-current assets to the parent for a profit or loss. 
B)  the parent selling inventories items or non-current assets to the subsidiary for a profit or loss. 
C)  the NCI selling inventories items or non-current assets to the parent for a profit or loss. 
D)  all of the options are correct. 
A)  the subsidiary selling inventories items or non-current assets to the parent for a profit or loss. 
B)  the parent selling inventories items or non-current assets to the subsidiary for a profit or loss. 
C)  the NCI selling inventories items or non-current assets to the parent for a profit or loss. 
D)  all of the options are correct.

Question 10

The non-controlling interest columns on a consolidation worksheet are used to:

Accepted Answer

A)  adjust the amounts that have been recorded for intragroup sales. 
B)  adjust the amounts that have been recorded for intragroup services. 
C)  eliminate the recorded amounts of the non-controlling investment in the subsidiary. 
D)  compile the amounts of non-controlling interest and parent share of particular line items. 
A)  adjust the amounts that have been recorded for intragroup sales. 
B)  adjust the amounts that have been recorded for intragroup services. 
C)  eliminate the recorded amounts of the non-controlling investment in the subsidiary. 
D)  compile the amounts of non-controlling interest and parent share of particular line items.

Question 11

Petros Limited is a subsidiary of Butros Limited. When Butros acquired its 60% interest in Petros, the retained earnings of Petros were $20 000. At the beginning of the current period Petros Limited's retained earnings were $50 000. Petros earned profit after tax of $10 000 during the current period. The share of the non-controlling interest in the equity of Petros Limited at the end of the current period is:

Accepted Answer

A)  $8 000. 
B)  $16 000. 
C)  $24 000. 
D)  $32 000. 
A)  $8 000. 
B)  $16 000. 
C)  $24 000. 
D)  $32 000.

Question 12

A Ltd holds a 60% interest in B Ltd. B Ltd sells inventory to A Ltd during the year for $10 000. The inventories originally cost $7 000 when purchased from an external party. At the end of the year all inventories are still on hand, but were sold by the end of the next period. The tax rate is 30%. The NCI adjustment required in relation to this intragroup transaction at the end of the next period is a credit to Retained earnings (opening balance) of:

Accepted Answer

A)  Nil. 
B)  $840. 
C)  $2 100. 
D)  $3 000. 
A)  Nil. 
B)  $840. 
C)  $2 100. 
D)  $3 000.

Question 13

Which of the followings is not the reason of why entities do not use the full goodwill method?

Accepted Answer

A)  Users of financial statements do not see any value in the reported NCI. 
B)  It is more costly to measure NCI at fair value. 
C)  It results in less reliable NCI information due to difficulties in measuring NCI at fair value. 
D)  There is not sufficient evidence to assess the marginal benefits of reporting the acquisition-date fair value of the NCI. 
A)  Users of financial statements do not see any value in the reported NCI. 
B)  It is more costly to measure NCI at fair value. 
C)  It results in less reliable NCI information due to difficulties in measuring NCI at fair value. 
D)  There is not sufficient evidence to assess the marginal benefits of reporting the acquisition-date fair value of the NCI.

Question 14

For an intragroup transaction to require an adjustment to the calculation of the non-controlling interest share of equity it must have which of the following characteristics:
I The transaction must result in the subsidiary recording a profit or a loss.
II After the transaction the other party (not the party holding the non-controlling interest) must have on hand an asset on which unrealised profit is accrued.
III The initial consolidation adjustment must affect both the statement of financial position and statement of comprehensive income.

Accepted Answer

A)  I and II only. 
B)  I, II and III. 
C)  II and III only. 
D)  None of the above. 
A)  I and II only. 
B)  I, II and III. 
C)  II and III only. 
D)  None of the above.

Question 15

Company A Limited owns 70% of the share capital of Company B Limited. Company B Limited paid a dividend of $10 000 during the financial period. The adjustment entries in the consolidation worksheet for the dividend include:

Accepted Answer

A)  Dr Dividend revenue $7 000. 
B)  Dr Dividend revenue $10 000. 
C)  Dr Dividend payable $7 000. 
D)  Dr Dividend payable $10 000. 
A)  Dr Dividend revenue $7 000. 
B)  Dr Dividend revenue $10 000. 
C)  Dr Dividend payable $7 000. 
D)  Dr Dividend payable $10 000.

Question 16

A non-controlling interest is a contributor of:

Accepted Answer

A)  equity to a consolidated group. 
B)  liabilities to a consolidated group. 
C)  assets to a consolidated group. 
D)  profit to a consolidated group. 
A)  equity to a consolidated group. 
B)  liabilities to a consolidated group. 
C)  assets to a consolidated group. 
D)  profit to a consolidated group.

Question 17

Which of the following information relating to the NCI is not required to be disclosed in accordance with the AASB 12 Disclosure of Interests in Other Entities?

Accepted Answer

A)  The proportion of ownership interests held by NCI. 
B)  The profit or loss allocated to NCI of the subsidiary during the reporting period. 
C)  The total number of shares owned by the NCI. 
D)  The name of the subsidiary. 
A)  The proportion of ownership interests held by NCI. 
B)  The profit or loss allocated to NCI of the subsidiary during the reporting period. 
C)  The total number of shares owned by the NCI. 
D)  The name of the subsidiary.

Question 18

A non-controlling interest in the net assets of a subsidiary consists of the amount of those non-controlling interests at the date of the business combination:

Accepted Answer

A)  less 100% of any post-acquisition dividends paid. 
B)  less the parent's share of any post-acquisition dividends paid or declared. 
C)  plus the non-controlling proportionate share of the changes in the subsidiary's equity since the business combination. 
D)  less the non-controlling proportionate share of increases in the subsidiary's equity since the business combination. 
A)  less 100% of any post-acquisition dividends paid. 
B)  less the parent's share of any post-acquisition dividends paid or declared. 
C)  plus the non-controlling proportionate share of the changes in the subsidiary's equity since the business combination. 
D)  less the non-controlling proportionate share of increases in the subsidiary's equity since the business combination.

Question 19

Which of the following statements is correct?

Accepted Answer

A)  The NCI is not entitled to share the group's profit. 
B)  Transactions that do not affect profit will not give rise to an adjustment to the NCI. 
C)  All intragroup transactions have an impact on the NCI share of equity. 
D)  When the parent entity sells inventories to its subsidiary, a consolidation adjustment needs to be recorded to reduce the NCI. 
A)  The NCI is not entitled to share the group's profit. 
B)  Transactions that do not affect profit will not give rise to an adjustment to the NCI. 
C)  All intragroup transactions have an impact on the NCI share of equity. 
D)  When the parent entity sells inventories to its subsidiary, a consolidation adjustment needs to be recorded to reduce the NCI.

Question 20

Which statements are incorrect with regards to a consolidation worksheet in the presence of the non-controlling interest:

Accepted Answer

A)  there is no NCI share extracted from the assets and liabilities section of the worksheet. 
B)  two extra columns are added to the worksheet to divide the consolidated equity into the NCI and parent share. 
C)  one extra column is added that includes the NCI share of the individual equity accounts. 
D)  one extra column is added that includes the parent share of the individual equity accounts. 
A)  there is no NCI share extracted from the assets and liabilities section of the worksheet. 
B)  two extra columns are added to the worksheet to divide the consolidated equity into the NCI and parent share. 
C)  one extra column is added that includes the NCI share of the individual equity accounts. 
D)  one extra column is added that includes the parent share of the individual equity accounts.

Exam 29: Consolidation: Non-Controlling Interest

Changes in equity in the previous periods up to the beginning of the current period that must be identified for the step 2 NCI entry do not include:

What is not an effect of choosing the partial goodwill method over the full goodwill method:

The step 1 NCI entry to reflect the NCI share of equity at acquisition date:

The following information does not need to be disclosed for NCI:

The intragroup transactions considered for NCI are normally those involving:

The non-controlling interest columns on a consolidation worksheet are used to:

Which of the followings is not the reason of why entities do not use the full goodwill method?

Company A Limited owns 70% of the share capital of Company B Limited. Company B Limited paid a dividend of $10 000 during the financial period. The adjustment entries in the consolidation worksheet for the dividend include:

A non-controlling interest is a contributor of:

Which of the following information relating to the NCI is not required to be disclosed in accordance with the AASB 12 Disclosure of Interests in Other Entities?

A non-controlling interest in the net assets of a subsidiary consists of the amount of those non-controlling interests at the date of the business combination:

Which of the following statements is correct?

Which statements are incorrect with regards to a consolidation worksheet in the presence of the non-controlling interest:

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Fair Value Measurement

Inventories

Property, Plant and Equipment

Intangible Assets

Impairment of Assets

Provisions, Contingent Liabilities and Contingent Assets

Employee Benefits

Leases

Financial Instruments

Income Taxes

Share Capital and Reserves

Share-Based Payment

Revenue

Presentation of Financial Statements

Statement of Cash Flows

Accounting Policies and Other Disclosures

Earnings Per Share

Operating Segments

Related Party Disclosures

Sustainability and Corporate Social Responsibility Reporting

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Foreign Currency Financial Statements

Business Combinations

Consolidation: Controlled Entities

Consolidation: Wholly Owned Entities

Consolidation: Intragroup Transactions

Consolidation: Other Issues

Associates and Joint Ventures

Joint Arrangements

Insolvency and Liquidation

Accounting for Mineral Resources

Agriculture

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